While plenty of high-yield opportunities exist, investors must always consider the safety of their dividend and the total return potential of their investment. It is not uncommon for a struggling company to suspend high-yielding dividends which could subsequently result in precipitous share price declines.
TheStreet Ratings' stock rating model views dividends favorably, but not so much that other factors are disregarded. Our model gauges the relationship between risk and reward in several ways, including: the pricing drawdown as compared to potential profit volatility, i.e. how much one is willing to risk in order to earn profits?; the level of acceptable volatility for highly performing stocks; the current valuation as compared to projected earnings growth; and the financial strength of the underlying company as compared to its stock's valuation as compared to its stock's performance.
These and many more derived observations are then combined, ranked, weighted, and scenario-tested to create a more complete analysis. The result is a systematic and disciplined method of selecting stocks. As always, stock ratings should not be treated as gospel — rather, use them as a starting point for your own research.
The following pages contain our analysis of 3 stocks with substantial yields, that ultimately, we have rated "Hold."DineEquity Dividend Yield: 4.30% DineEquity (NYSE: DIN) shares currently have a dividend yield of 4.30%. DineEquity, Inc., together with its subsidiaries, owns, franchises, and operates full-service restaurants in the United States and internationally. The company has a P/E ratio of 28.41. The average volume for DineEquity has been 175,800 shares per day over the past 30 days. DineEquity has a market cap of $1.6 billion and is part of the leisure industry. Shares are down 18.1% year-to-date as of the close of trading on Monday. EXCLUSIVE OFFER: See inside Jim Cramer's multi-million dollar charitable trust portfolio to see the stocks he thinks could be potential winners. Click here to see his holdings for 14-days FREE. TheStreet Ratings rates DineEquity as a hold. The company's strengths can be seen in multiple areas, such as its increase in net income, expanding profit margins and growth in earnings per share. However, as a counter to these strengths, we also find weaknesses including weak operating cash flow, a generally disappointing performance in the stock itself and generally higher debt management risk. Highlights from the ratings report include:
- The company, on the basis of net income growth from the same quarter one year ago, has significantly outperformed against the S&P 500 and exceeded that of the Hotels, Restaurants & Leisure industry average. The net income increased by 28.4% when compared to the same quarter one year prior, rising from $18.89 million to $24.26 million.
- The gross profit margin for DINEEQUITY INC is rather high; currently it is at 63.08%. It has increased from the same quarter the previous year. Regardless of the strong results of the gross profit margin, the net profit margin of 14.93% trails the industry average.
- DINEEQUITY INC has improved earnings per share by 29.3% in the most recent quarter compared to the same quarter a year ago. This company has reported somewhat volatile earnings recently. But, we feel it is poised for EPS growth in the coming year. During the past fiscal year, DINEEQUITY INC reported lower earnings of $1.89 versus $3.71 in the prior year. This year, the market expects an improvement in earnings ($5.92 versus $1.89).
- DIN has underperformed the S&P 500 Index, declining 11.57% from its price level of one year ago. The fact that the stock is now selling for less than others in its industry in relation to its current earnings is not reason enough to justify a buy rating at this time.
- Net operating cash flow has significantly decreased to $22.47 million or 51.61% when compared to the same quarter last year. In addition, when comparing to the industry average, the firm's growth rate is much lower.
- You can view the full DineEquity Ratings Report.
- The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Real Estate Investment Trusts (REITs) industry. The net income increased by 393.0% when compared to the same quarter one year prior, rising from -$26.74 million to $78.33 million.
- RETAIL PPTYS OF AMERICA INC reported significant earnings per share improvement in the most recent quarter compared to the same quarter a year ago. The company has demonstrated a pattern of positive earnings per share growth over the past two years. However, we anticipate underperformance relative to this pattern in the coming year. During the past fiscal year, RETAIL PPTYS OF AMERICA INC turned its bottom line around by earning $0.15 versus -$0.20 in the prior year. This year, the market expects earnings to be in line with last year ($0.15 versus $0.15).
- In its most recent trading session, RPAI has closed at a price level that was not very different from its closing price of one year earlier. This is probably due to its weak earnings growth as well as other mixed factors. Turning toward the future, the fact that the stock has come down in price over the past year should not necessarily be interpreted as a negative; it could be one of the factors that may help make the stock attractive down the road. Right now, however, we believe that it is too soon to buy.
- Net operating cash flow has declined marginally to $66.09 million or 5.94% when compared to the same quarter last year. In addition, when comparing the cash generation rate to the industry average, the firm's growth is significantly lower.
- You can view the full Retail Properties of America Ratings Report.
- MDU's revenue growth has slightly outpaced the industry average of 3.1%. Since the same quarter one year prior, revenues slightly increased by 5.5%. This growth in revenue does not appear to have trickled down to the company's bottom line, displayed by a decline in earnings per share.
- The debt-to-equity ratio is somewhat low, currently at 0.97, and is less than that of the industry average, implying that there has been a relatively successful effort in the management of debt levels. Although the company had a strong debt-to-equity ratio, its quick ratio of 0.81 is somewhat weak and could be cause for future problems.
- The company, on the basis of change in net income from the same quarter one year ago, has significantly underperformed when compared to that of the S&P 500 and the Multi-Utilities industry. The net income has significantly decreased by 235.1% when compared to the same quarter one year ago, falling from $103.21 million to -$139.45 million.
- The gross profit margin for MDU RESOURCES GROUP INC is currently extremely low, coming in at 13.09%. It has decreased from the same quarter the previous year. Along with this, the net profit margin of -10.89% is significantly below that of the industry average.
- You can view the full MDU Resources Group Ratings Report.
- Our dividend calendar.